The View From Europe

On October 23 the European Commission published a new Communication (policy paper) on Economic Partnership Agreements (EPA). This seven-page document sets out what the EC intends to do if any EPA negotiation cannot be completed on time.

In effect its publication means that Europe has begun to put in place a contingency plan if negotiations with the regions of the African, Caribbean and Pacific group (the ACP) fail.

For months Europe has been cajoling ACP groupings to conclude an EPA in enough time to have a legal text in place by December 31, 2007; the date that the WTO waiver on the trade provisions in the Cotonou Convention expires. If they did not, it suggested, the significantly less beneficial Generalised Scheme of Preferences (GSP) tariff regime would be imposed in place of the present tariff free entry that ACP nations enjoy for most of their exports to Europe.

But now as the deadline nears, a full EPA may only be possible with the Caribbean and Central Africa and a limited scope trade arrangement with the Pacific. In the other EPA negotiations agreement is unlikely.

Faced with such uncertainty in all six regions the EC has had to recognise that it urgently needs to have a legally clear alternative position to deploy at the World Trade Organisation (WTO).

Speaking about this to the to the Committee on International Trade of the European Parliament on October 22, the EC Trade Commissioner, Peter Mandelson, told its members he was concerned that ACP partners were taking the market access negotiations “to the edge”. Early November was the final negotiating deadline and even this would stretch European procedures to their limits. To avoid trade disruption where a full EPA is not yet complete, he said, “an agreement with a goods market access arrangement at its core” was required.

Put more simply what the EC is now formally proposing for nations unable to reach agreement on a full EPA would be an alternative arrangement that reduces over an agreed period, tariffs on goods (as opposed to services) as long as it leads to a free trade area in which duties and other restrictive regulations are eliminated on substantially all trade.

In his remarks, the EC’s Trade Commissioner accepted that even this alternative arrangement may not be easy to achieve. WTO rules require ACP nations to liberalise more than eighty per cent of trade and many ACP regions are still struggling to try to achieve a tariff reduction schedule that has this level of coverage.

The Communication published the following day spelt out the detail.

Where achieving a comprehensive EPA cannot be achieved by the year’s end the EC it seems will regard a goods only arrangement as a step towards an eventual full EPA. ‘Where possible’ the text of any such goods only agreement will include all other language that has been agreed.

In order that the negotiations continue after any such arrangement is in place the EC will propose that all goods only agreements must include binding commitments to continue negotiations in areas where agreement was not possible and contain rendezvous clauses setting out when and how such negotiations will be taken forward.

The EC document proposes that in ACP regions where some countries are unwilling to join an EPA, Europe should be prepared to reach an agreement with sub-regions while holding out the possibility of eventually opening to those nations not signing on immediately

Where a full EPA or a goods only trade agreement is not achievable, the communication states unequivocally that EU customs authorities will apply the GSP trade regime.

Europe is also proposing that new EPA rules of origin, the details of which remain contentious in almost all negotiations, should apply in any goods only arrangement while accepting that these will come into force some time after an agreement comes into force.

Tucked away in the text is also the suggestion that the EC will probably establish implementing regulations for transitional arrangements for sugar and rice as a part of its market access offer of earlier in the year to abolish quotas and duties on all ACP products other than these two commodities.

What all this amounts to is further pressure on the Caribbean to try to complete a comprehensive EPA on time.

The final Caribbean negotiating session is due to take place in Kingston between October 31 and November 5, although it is understood that a concluding meeting could be added if necessary in Brussels a week or so later. As matters stand, intensive exchanges continue over existing and new text but serious differences remain in a number of areas ranging from sugar, through services to the quantum, source and destination of development assistance. There is also a concern in some Caribbean business quarters about the time left for consultations with stakeholders in the industries most affected and the extent to which their concerns are fully understood.

In his remarks to European Parliamentarians, Peter Mandelson, made clear that there were also other imperatives driving the EU’s desire to complete the new trade arrangements.

“We are right to remain firmly on a course that will replace our current trade regime with new agreements which can underpin a process